What kind of potential do wargames have to help organisations prepare for not just the worst, but also the day-to-day struggles of the modern supply chain landscape?
Tearing up the rulebook — a new age of supply chain disruption
The last five years have — I don’t think it’s controversial to say — been a wild ride for global supply chains.
From trade wars between the US and China to an actual war in Ukraine; from an ongoing genocide in Gaza to the seizure of shipping in the Red Sea; from climate crisis-related crop failures and extreme weather events to the rise of generative AI and the ascendency of a US president who is still a vocal climate skeptic; the needle measuring the number, frequency, and scale of disruptions to global supply chains feels like it buried itself in the red circa 2020 and has barely dipped below that line since.
Not only is it a fact that our current state of heightened disruption has made it more important than ever that supply chain managers plan and prepare for the unexpected, but shifting trends in supply chain organisation brought on by this new climate of disruption are making it uniquely difficult to draw on past experiences in order to predict the future. After all, much about the neoliberal philosophies of globalisation and free market economics that defined trade from the 1980s through to the spread of COVID-19 has been shown to be ineffective.
As the Harvard Business Review noted back in September of 2020, the “economic turmoil caused by the pandemic has exposed many vulnerabilities in supply chains and raised doubts about globalisation.”
Out of the frying pan
In response, many organisations are looking to restructure their value chains, moving manufacturing and assembly closer to home with the hope of reaping the triple benefit of increased resilience, cut carbon, and lower costs. But successfully nearshoring your business is complicated, and success isn’t guaranteed. Organisations looking to move their operations away from China, for example, often find themselves jumping out of one geopolitical frying pan and into the fire as they explore Eastern Europe, Africa, and South America as alternative sources of cheap labour and materials.
“We’re in a new era. I don’t think that there is a normalisation anymore. I think that what companies are now facing is that supply chain disruption is the new norm” – Marissa Adams, head of global trade solutions at HSBC Americas
This trend isn’t going anywhere, either. As the world ramps up for an AI revolution and a green transition, competition over critical resources like lithium and other minerals, as well as scarcer water, food, and land will only intensify as the century continues. If things move even half as fast as we expect, the supply chains that wealthy nations consider critical are about to change radically in the next few decades—crude oil giving way to lithium and cobalt to some degree, for example. Even in wealthy, relatively stable nations like the UK, experts have warned that food shortages due to extreme weather could trigger civil unrest within the next decade. Over the next 50 years, nearly 80% of experts believed civil unrest was either possible (45%), more likely than not (24%), or very likely (10%) in the UK, as the climate crisis puts pressure on global supply chains.
Supply chain managers in the public and private sectors are going to be critical over the coming decades (even more so than they are now) as the world figures out how to maintain the flow of goods and materials in the face of ever more common disruptions.
Gaming out the unknown
The problem with something new, of course, is that it’s hard to predict exactly how to respond to it. Taking the past ten years worth of data and finding the averages only really works if the fundamental shape of the system remains the same. Given the amount of change we’ve seen in just a few years, who knows what 2030 will look like, let alone 2050. Who could predict what shape the next global disruption will take? Will it be war? Another pandemic? Extreme weather? Civil unrest? Crop failure? In all likelihood, it will be some new combination of the above that our global supply chains have never faced before.
How do you prepare for something you’ve never faced? Simple. You wargame it.
Taiwan has fallen
Back in 2023, UK telecom company BT got together to run a series of “nightmare scenarios”, testing how their operations would respond should the unthinkable happen and a major geopolitical flashpoint ignite into conflict.
BT carried out tests on its supply chain to better understand and prepare for any fallout amid escalating conflict between China and Taiwan, which was at a high point in April of that year following Speaker Nancy Pelosi’s visit to Taipei.
In a “war game” that lasted two days, BT’s supply chain and procurement teams tested how they would respond in the event of a conflict in the region escalating further — an event that could overnight halt over 60% of the world’s semiconductor production. According to political-economic think tank Rhodium Group, if China and Taiwan enter into open conflict, it could “put well over $2 trillion in economic activity at risk, even before factoring in the impact from international sanctions or a military response”.
But what does a supply chain war game look like? According to Johan Gott, co-founder of US political risk consultancy Prism in an interview with the Financial Times, participants receive a series of “news flash” events which the participants have to respond to — the success or failure of their efforts determined by a combination of digital tools and human adjudicators.
A BT spokesperson said that “like many businesses, we regularly run simulations to stress test our business on a range of scenarios as part of our risk management and planning”.
Game on — What to expect when wargaming #
With origins dating all the way back to Prussian military commanders during the early 1800s, wargaming has a long history tangled up with, among other things, the author H.G. Wells, Dungeons & Dragons, and the modern military industrial complex. The practice is actually having a moment right now as global uncertainties increase, and everyone from militaries to humanitarian aid groups seek to make their responses to each new crisis more likely to be effective.
Wargaming a supply chain has a few key steps.
1. Identify
Identifying the Black Swan Events that are most likely to cause serious damage to your supply chains. Consider the current events, trends, and interlocking relationships (both economic and political) in your region. Try to find commonalities between the ways in which different events could impact your supply chain. Consider everything from natural disasters and political instability to cyberattacks and pandemics.
2. Tool up
Build your testing tools. Most organisations start by creating a digital replica of their entire supply chain using simulation tools. This digital twin should represent all critical elements of your network, including suppliers, manufacturing sites, transportation routes, and customer locations. However, the intricate interactions between multiple actors in complex systems are difficult to map with digital tools alone. Often — just as in 1800s Prussian wargames — an experienced “referee”, a human who can add their own opinion and intuition to interpret the results can be helpful. It’s actually somewhat similar to the reason why Dungeons & Dragons needs a human dungeon master; there are simply too many different outcomes to consider.
3. Play
Whatever blend of digital, data-based, and human tools you choose to use, the next step is actually running a wargame. Use your tools to simulate various disruption scenarios, focusing on the potential impact of “black swan” events. Evaluate how these disruptions influence production, inventory, and delivery timelines to gain insights into your network’s vulnerabilities.
4. Implement
From there, use the simulation results to evaluate the effectiveness of your current contingency plans and identify areas needing improvement. Address gaps by developing and testing new strategies, such as diversifying suppliers, establishing alternative transportation options, or increasing safety stock levels.
Should you be wargaming?
Well, it depends. As games journalist Quintin Smith notes at the end of his excellent documentary on wargaming, wargames… don’t actually always work. It’s one of the reasons why predictions at the outset of the war in Ukraine were so wildly off the mark. The data being used to wargame scenarios pointed one way, but because they didn’t account for things like the role of UAVs or overestimations of the Russian army’s readiness, their predictions were wrong. Dead wrong.
Nevertheless, wargames could still very much have a role in helping organisations game out the next big disruption, especially as we now have more recent major events to draw data from, and our digital tools are getting better all the time. In October of 2024, a wargame conducted by the CNA exploring the military clothing supply chain revealed bottlenecks that “in a major war scenario would have left military personnel short of uniforms.”
“The implications of these findings could extend well beyond uniforms,” said Gordon Jaquith, executive director of CNA’s Department of Navy Relations. “It’s a wake-up call to prepare for wartime demands on the US industrial base as a whole.”
With the potential to expose glaring weaknesses in critical logistics and supply chain systems, wargames could be an important weapon in the hands of supply chain leaders.
- Risk & Resilience
